Latest domestic bond issue sign of 'distress' - economist

Thursday's bond will be sold through the book-building system that mainly targets institutional investors and offshore buyers, the arrangers told Reuters.


Turkson suspects the bond that will be issued on Thursday "might be an emergency move to raise money to retire the loans."

“When it comes to sustaining the debt stock, we are not on track. Unfortunately we are being told that we are borrowing to restructure our debts. All these show a sign of distress,” Turkson told Citi FM.

Last month, a three-year GHC500 million domestic bond was immensely undersubscribed.

Instead of the targeted 500 million Ghana Cedis, the Bank of Ghana was only able to attract GHC350 million ($78.1 million) at a fixed rate of 24.5%  the same as the rate for the three-year GHC500 million bond government floated in April 2016.

Head of Banking and Finance at the University of Ghana Business School, Dr. Godfred Bokpin said the under-subscription was a sign of dwindled confidence in the country’s debt situation.

In an interview with, Dr. Bokpin said “Government has maintained a stable borrowing behaviour over the past four years, and as your borrowing increases, more and more investors become sceptical going forward. This is why the interest rates of these investors will increase, and their willingness to lend decreases as well.”

In January, government issued a similar domestic bond which was under-subscribed.

While government wanted a total of 500 million Ghana Cedis, it was able to raise only 426 million Ghana Cedis by the end of the issuance of the bond in total offers.

Out of this, the Bank of Ghana took 373 million Ghana Cedis at an interest of 24.75 percent, something that has sparked concerns amongst analysts because  the rate is higher than the country's last interest in the last domestic bond issue where government got a 23.85 percent.

Whereas some analysts thinks the situation suggests that investor confidence in the Ghanaian economy, others believe it’s as a result of the U.S interest rate hikes.


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